Login Open account
Hong Kong S.A.R
By using our website you agree to our use of cookies in accordance with our cookie policy.
Okay
Companies most exposed to the UK are getting crushed Companies most exposed to the UK are getting crushed Companies most exposed to the UK are getting crushed

Companies most exposed to the UK are getting crushed

Macro 4 minutes to read
CD
Christopher Dembik

Head of Macro Analysis

Summary:  The path towards a Brexit resolution remains strikingly unclear, but one thing is certain: firms with high exposure to the UK market are taking it on the chin.

Despite the Kafkaesque political situation in the United Kingdom, the risk of an outright no-deal Brexit is quite low. The extension of the Article 50 deadline, for instance, could provide more time for the British government to find another solution. It could be a new referendum, or even an amended Brexit plan by Parliament. In other words, it is way too early to panic. Brexit is a very irrational decision, but it is unlikely that UK citizens and politicians are ready to commit political hara-kiri (or that European Union leaders would allow it).

There will be agreement, it is only a matter of time.

Limited macro impact but striking market impact

Brexit's macro impact is quite easy to evaluate: lower growth (though still above potential growth), higher inflation due to a lower GBP exchange rate and a lower savings rate as the British had to tap into their savings to cope with the economic slowdown. 

On the other hand, assessing the impact of Brexit on companies is trickier. We can try to do so by using data from CBOE Bats (which covers 57 indices across 15 countries, pan-European and Eurozone regions, and Brexit and sector indices) as a benchmark for economic attractiveness and investment.

In the chart below, the blue line represents the 50 companies less exposed in terms of revenue to the UK market (Bats Brexit Low 50) and the red line represents the 50 companies that derive the largest portions of their revenues from the UK (Bats Brexit High 50).
The result is quite striking: Brexit UK risk premium is extremely high.

Since January 1, 2016, the performance of companies dependent on the UK market is negative (-4%) while that of companies least dependent on the UK market is nearly 40%! This gap is likely to remain wide if the Brexit political mess continues, and it can easily be explained by higher uncertainty regarding the UK’s relationship with the EU, negative consumer trends and the decline in the expected future openness of the UK to trade and investment. 

All of this is making companies highly dependent on the UK less attractive for most investors, but for risk takers, the discount on stocks linked to Brexit constitutes a strong incentive to come back to this market.
CBOE Bats

Quarterly Outlook Q4 2023

Bond. Long Bond(s)

Bond. Long Bond(s)

  • Bond. Long Bond(s)

    With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.  

    Steen Jakobsen,
    Chief Investment Officer

    Read article

  • The road to a bond bull market is paved, although challenges remain

    Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.

    Althea Spinozzi,
    Senior Fixed Income Strategist

    Read article

  • FX: King dollar and its far-reaching repercussions

    The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.

    Charu Chanana,
    Market Strategist

    Read article

  • Equities: Higher cost of capital is getting painful

    With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.

    Peter Garnry,
    Head of Equity Strategy

    Read article

  • Commodity sector supported by peak rates, tight supply focus

    With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.

    Ole S. Hansen,
    Head of Commodity Strategy

    Read article

  • No one's indestructible

    As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.

    Redmond Wong,
    Market Strategist

    Read article

  • Time to (re)consider bonds

    The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes. 

    Peter Siks,
    Investment Coach

    Read article
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R
Products & pricing
Asset Management
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.